Prices of housing , energy and services helped drive up the rate this month
Inflation has risen for the second time in a row with fuel and motor prices pushing things up.
Here, we explain everything you need to know about the latest inflation stats and which savings accounts offer inflation-beating rates.
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What is the current rate of inflation in the UK?
The current CPI rate of inflation in the UK is 3.1% for August 2026, according to the latest figures from the Office for National Statistics (ONS). That’s an increase from 2.9% in July and the second rise in a row. However, it’s much lower than the 3.8% rate about a year ago.
The current rate of core inflation (which removes more volatile products like food and fuel) in the UK is 2.6%, which is unchanged from last month. Services inflation, which includes things like rent, childcare, internet and phone services, remained high at 3.4%.
Meanwhile, RPI (still used in some cases such as rail fares, interest on student loans and air passenger duty) in the UK increased from 3.2% to 3.4%.
Historic inflation rates
The graph below shows how CPI inflation has changed in the UK.
What is inflation?
The main thing to remember is even if the rate of inflation is falling, prices are still going up. They’re just increasing by a slower rate.
Check out our What are inflation and deflation? article to learn more about what price changes count towards inflation, as well as explanations of the different measures including CPI and RPI.
What’s changed this month?
The higher inflation rate was largely driven by increases in fuel prices, as a result of the ongoing conflict in the Middle East.
Motor fuel prices went up by 23% July. We’ve seen the impact at the pump with the average petrol price rising by 9.1p between July and August to 161.3p a litre, the highest it’s been since November 2022. Meanwhile diesel prices went up to 181.8p a litre, a rise of 14.2p.
We also saw airfares increase by 6.2% between July and August, with long-haul routes being particularly affected. Food costs remained stable at 1.3% with sugar, jam and chocolate increasing slightly in price, albeit less than 12 months ago, and the price of meat and fruits dipping slightly.
While sugar, jam, syrups, chocolate, and confectionery did go up slightly in price, according to the latest ONS figures
You can see how prices have changed for individual items in this ONS calculator, while this chart shows the annual CPI rates over 12 months for the last three months.
| June 2026 (%) | July 2026 (%) | August 2026 (%) | One month change | |
|---|---|---|---|---|
| CPI All items | 2.6 | 2.9 | 3.1 | 0.2 |
| Food and non-alcoholic beverages | 1.7 | 1.3 | 1.3 | N/A |
| Alcohol and tobacco | 2.1 | 2.5 | 2.7 | 0.2 |
| Clothing and footwear | -0.5 | 0.5 | 0.2 | -0.3 |
| Housing and household services | 1.2 | 4.6 | 4.9 | 0.3 |
| Furniture and household goods | -0.2 | 1 | 0.8 | -0.2 |
| Health | 2.5 | 3.7 | 3.7 | N/A |
| Transport | 5.7 | 3.6 | 4.6 | 1 |
| Communication | 5.2 | 5 | 5.3 | 0.3 |
| Recreation and culture | 1.7 | 1.4 | 1.6 | 0.2 |
| Education | 5.1 | 5.1 | 5.1 | N/A |
| Restaurants and hotels | 4.4 | 4 | 4.1 | 0.1 |
| Miscellaneous goods and services | 2.7 | 2.7 | 2.9 | 0.2 |
| All goods | 1.7 | 2.2 | 2.7 | 0.5 |
| All services | 3.6 | 3.4 | 3.4 | N/A |
| CPI exc food, energy, alcohol and tobacco (core CPI) | 2.6 | 2.6 | 2.6 | N/A |
Source: Consumer price inflation from the Office for National Statistics
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Will inflation go up or down?
With the ongoing conflict in the Middle-East experts warn we could see higher inflation for the rest of the year, adding pressure to households ahead of the autumn Budget in October, when higher energy bills will push inflation even higher.
We’re moving further away from the Bank of England’s 2% inflation target, which could easily take until 2027 to reach.
What does it mean for the base rate of interest?
In September, the Bank of England kept the base rate to 3.75%.
With inflation being driven up by a war that shows no signs of relenting, it would be easy to assume further increases to the base rate to get it under control. And with markets pricing in one to two rate rises before the end of the year, experts are suggesting a hold this month could be the ‘calm before the storm.’
The Bank’s suggested the base rate could be 4.2% in Q3 of 2027, and remain there in the same quarters in 2028 and 2029. If that was to come to pass, we’d expect two 0.25 percentage point increases in the next 12 to 15 months.
However, as ever these are just predictions and could change at any time.
What does it mean for future price increases
This month’s inflation rate isn’t linked to any specific benefits or increases. Here are the main price hikes linked to inflation rates:
- July RPI – rail fares in March
- September CPI – benefits including State Pension in April
- December CPI – student loans in September
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Do any savings accounts beat inflation?
If possible, it’s always important to have interest rates higher than inflation – otherwise you’re losing money in real terms.
There are 1,815 savings accounts that beat inflation, according to data firm Moneyfacts – 193 easy access, 161 notice accounts, 159 variable rate ISAs, 417 fixed rate ISAs and 885 fixed rate bonds.
The top-paying savings account is Halifax’s regular saver which offers 8% for 12 months. It’s worth noting that this is a regular savings account and you can only pay in a maximum of £250 a month.
You can also earn 6% with the Santander Edge Saver on up to £4,000, if you hold a Santander Edge account. If you add direct debits (to earn cashback) on the linked current account there’s a monthly fee for the current account, so keep that in mind when comparing savings rates.
However if you’re looking for accounts without these balance restriction, there are still a good number of easy access and fixed rate savings accounts above the inflation rate.
When is the next inflation announcement?
The next inflation announcement will be on 21 October 2026. The ONS publishes inflation figures each month and has confirmed the following dates for upcoming announcements :
- 18 November 2026
- 16 December 2026
Hi Andy, great summary, very professional. I’m still learning about all of these subjects, so thanks for that!
Do you know what to expect regarding the interest rate of the savings accounts? Are the banks planning to reduce the interest rate soon based on the reduction in the UK inflation?
Government controlled ONS will produce low incorrect data for September in order to determine next years pension & benefit increases then “amend” the data by December so the government can claim that it is too late to correct next years increases.